NDN Blog

Debating the Bush Economic Record: Increasing Economic Risk

Yesterday, David Brooks published a column in the New York Times called "Inequality Myths." The main message of the column is that "the meritocracy is working almost too well. It's rewarding people based on individual talents." Therefore inequality, which he denies is increasing when he says "workers over all are not getting a smaller slice of the pie ... [w]ages and benefits have made up roughly the same share of G.D.P. for 50 years," is not a serious issue, and has nothing to do with government policy or power relationships. His solution is to implement "human capital policies ... to help them get the intangible skills."

The statistics in his column are examined by, among others, Jared Bernstein and Dean Baker, and the case Brooks makes does not hold up to closer scrutiny. However, columns and arguments like Brooks' come up often so it's worth taking a closer look at what they tell us, and what they leave out.

Much of the assessment of the relative well-being of different classes of workers is based upon the comparison of means or, when large outliers are important, medians. For instance, there has been a lot of attention devoted recently to whether workers wages are keeping up with inflation and changes in productivity, and how the difference in income between classes has changed over time.

But, as discussed here by Yale economist Jacob Hacker, a focus on means and medians misses an important element of well-being, risk. For example, would you take a job offer for $10,000 more in salary if it raised the chances of becoming unemployed by 30%? Mean income is higher if the job is taken, but taking the job does not necessarily make you better off since it also increases economic risk (the decision depends upon tolerance for risk, among other things). Thus, the relatively small increases in compensation for workers in recent years must be balanced against increases in economic risk workers face when examining whether recent economic changes have made workers and their families better or worse off.

Today, workers face increased insecurity about their own and their employer's future as competition is heightened due to globalization. There has been a decline in external buffers such as pension coverage, health care coverage, and other social programs. Workers face increased variability of returns to education due to factors such as outsourcing, and the volatility of personal income has risen since 1975. Jacob Hacker estimates that income volatility has increased 88% from 1978-2000.

These are just a few of the changes causing workers to feel increased anxiety about future economic prospects. For more on the topic of economic risk from Jacob Hacker, a leader in this area, see "There goes the rug," "Economic risk has shifted from the government and corporations to workers and their families," "Social Security as Dramamine" [alt. link], and "The Real Issue Is Risk." The point is that with risk up substantially while compensation has stagnated, it's understandable why households report dissatisfaction with economic conditions. Those who focus solely on relative income, wages, living standards and other measures of mean or median performance miss an important component of the change in well-being, rising economic risk. So long as risk is ignored by some pundits, they are likely to remain mystified as to why typical workers report dissatisfaction with the Bush economy.

This is a guest contribution as part of NDN's ongoing debate about the economy. Read our new report The Bush Economic Record here.

Debating The Bush Economic Record: Education Matters More than Anything

Today, a worker with a High School diploma earns on average $27,915, one with a college degree earns $51,206 and those with an advanced degree earn $74,602.

In a global economy that values ingenuity and technical know-how, a college degree is as important as a high school diploma was 50 years ago.  Now we must make it as common.

This is what we did during my time as Governor of Indiana. In 1990, even in the depths of the last recession when the budget was tight, we created the 21st Century Scholars.  What it says to every child whose family qualifies for the free or reduced lunch program – and who in 8th grade signs a written pledge to graduate from high school with passing grades, every one of those children is entitled to a full college scholarship to the public university of their choice, and those scholarships are fully transferable to the private university of their choice. 

This program helped Indiana move from 40th in the country in the percentage of our kids who go on to higher education to 9th.  We are literally lifting up more than a hundred thousand poor children and saying to them, if you believe in yourself, if you do your part, you can count on us to do our part too.  They are better workers, better taxpayers, and better citizens. It’s good for us all. We should do that for every child in this country – each and every one.

We also need to help middle class families pay for college. Today the average student graduates with $19,300 student loans. This is a crisis that needs to be addressed. Over the last five years, average total tuition and fees have increased by 32 percent at private four-year colleges and universities, 57 percent at public four-year colleges and universities, and 33 percent at public two-year colleges. Parents can no longer meet this burden; many of them are faced with the daunting task of paying for college and taking care of their parents at the same time.

Government must step up and meet this challenge with them. By providing a $6,000 tax credit for college, we start to ease the burden on parents and students and make a college education an attainable goal and put them on the path to the American dream.

Education is the path to success for our children. To lead in the global economy America must produce the best and brightest the world has to offer. Companies should not have to recruit engineers in India because they cannot find enough in Indiana.

This is a guest contribution as part of NDN's ongoing debate about the economy. Read our new report The Bush Economic Record here.

Debating The Bush Economic Record: Rebuilding the National Consensus on Trade

This is an important time for the cause of open markets and trade liberalization. The current round of global trade negotiations, the Doha Round, has collapsed; and we will soon learn whether the Administration and other leaders can restart them.   As British Chancellor of the Exchequer Gordon Brown wrote recently,  ” … the world economy faces an uncertain autumn … (from )not only the impact of terrorism and geopolitical uncertainty on our economies, but also a surge of protectionism.”  Brown also yesterday called for the restarting of Doha at a meeting in Singapore in the coming months.

On this side of the Atlantic, Brown’s warning should have the distinct ring of truth.  Pascal Lammy might have said this week that he is hopeful for a re-start, but there is little sign that the current administration will expend much political capital making this happen. More worryingly, The Times yesterday ran a timely piece arguing that the size of Bush’s trade deficit is a threat to growth not just in America, but for the rest of the world too.

In the wake of five years of accelerating globalization during which American wages have stalled and job creation has slowed, the national consensus to continue to liberalize trade –one that has held fast for more than fifty years -- is in danger of unraveling,   To rebuild that consensus, we need a clear vision, strong leadership and a serious program to ensure that working Americans benefit as much from globalization as American businesses.

For the past half century, open trade has been a crucial part of the formula for global peace and prosperity; and  America’s greatest leaders have maintained a broad, bipartisan consensus against protectionism. FDR and Harry Truman created the architecture for an open post-war system. JFK launched the modern series of multilateral trade talks.  President Reagan began the Uruguay Round and the NAFTA negotiations – and President Clinton enacted both with bipartisan support.

President Bush has failed to show any comparable leadership through the Doha Round and his broader economic policies.  Whatever we do, globalization is not going away or even slowing down. As FDR, Harry Truman, JFK and Bill Clinton all understood, liberal trade and globalization are ultimately progressive causes.  Progressive need to rebuild the national consensus for trade and globalization with a new program that will ensure that all Americans can benefit from both.

The Wheels are Coming Off the Housing Market

Housing is one of the primary drivers of this economic expansion. Between construction, service and financial jobs, housing is responsible for about 30% of total jobs created during this expansion. Home equity loans have fueled consumer spending at a time when inflation has destroyed any income gains. And the increase in home prices has increased the "wealth effect" -- where people feel richer and therefore spend more.

 

The latest news from teh housing industry has been uniformly bad.

 

Consider the following facts which show year over year (from August 2005 to August 2006) changes in various housing statistics. (From EconBrowser

Builders’ sentiment Down 52.2%

New-home sales Down 21.6%

Purchase-mortgage applications Down 20.9%

Building permits Down 20.8%

Housing starts Down 13.3%

Existing-home sales Down 11.2%

Existing-home inventories Up 39.9%

New-home inventories Up 22.4%

These facts help to explain the following three new developments in housing.

Homebuilders are again reporting lower earnings. From The Street.com<

Homebuilders continue to cut their guidance amid a rapidly declining U.S. housing market, highlighted by growing inventories of homes for sale and increased cancellations from buyers.

In the past 24 hours, KB Home and Beazer Homes both slashed their full-year guidance, while Hovnanian's earnings fell sharply from a year ago.

It's also worth noting that these companies are so uncertain about the future of the housing market that they have not yet issued guidance for 2007.

One of the most shocking numbers from Hovnanian's earnings call was that the company's new orders fell 31% in the Western U.S., despite Hovnanian's community count increasing 24%.

KB Home also said preliminary numbers show a 43% drop in new orders for the third quarter, as cancellations rise and traffic declines at its communities.

Thursday morning, Beazer said it expects earnings of $8 to $8.50 a share for fiscal year 2006, down from its previous forecast of $9.25 to $9.75. The company will likely close a smaller number of homes in the fourth quarter than it previously projected, as net sales through the two months ended Aug. 31 dropped 49% from last year and cancellations of existing contracts rose to 50% from 26% a year ago.

There is nothing good in the previous news. First, homebuilders are cutting their forecasts. For most this is the second cut and for some it is the third. Secondly, no one wants to give earnings guidance. Earnings guidance isn’t required by any regulation. However, it is standard operating procedure on Wall Street. Not giving any guidance is a big sign of deep concern among homebuilders. Third, notice the large jump in cancellations. This isn’t just a few percentage points of statistical noise; it’s a really large increase.

The drop in sales is occurring despite massive increases in incentives.

David Seiders, chief economist for the National Association of Home Builders says 75 percent of the nation's builders and developers are offering incentives.

Those incentives range widely. "Developers will upgrade appliances, put in a Garland range or a Sub-Zero refrigerator," says Diane Saatchi, a vice president with the Corcoran Group who specializes in Hamptons properties.

One big developer, Elliott Homes, will landscape the backyard and upgrade your appliances, if you're ready to purchase one of their $439,950

homes at Rancho Cordova in California.

The Associated Press reported last week that a new San Diego condo development, Atria, was giving away plasma TVs and $5,000 home renovation gift certificates.

Some buyers, however, may just want money - and those deals abound.

"Price cuts are averaging 5 percent to 6 percent," Seiders says, "and 30 percent of all the large builders have cut prices in at least some of their developments by 10 percent or more.

Simply put, the increased use of incentives indicates demand is dropping. When 75% of market participants uses incentives, it’s a very strong indication demand is dropping in a big way.

Let’s turn to this announcement from the National Association of Realtors:

Home sales during the rest of the year will be lower than earlier projections as the market works its way through an inventory and price imbalance, according to the National Association of Realtors®.

David Lereah, NAR’s chief economist, said the most obvious effect in the near term will be with home prices. “A year ago we had record home sales and tight supply with buyers bidding over the asking price,” he said. “This year sales are slowing, homes are plentiful and sellers are negotiating. Under these conditions, we’ll probably see prices dip temporarily below year-ago levels as the market works through a build up in housing inventory.”

“This is a normal pattern during a market correction, but home prices should return to positive territory within a few months and annual appreciation will be slower than historic norms,” Lereah said. “Keep in mind that over time, home prices rise at the rate of inflation plus one-to-two percentage points – buyers in most of the country who plan to stay in their home for a normal period of homeownership can pretty well bank on those historic averages, but people who purchased last year with the intent of flipping are likely to get burned.”

First, this analyst is doing a fair amount of hedging in these statements. Homes aren’t just plentiful; inventories for new and existing homes are at records. Buyers aren’t just negotiating. Considering the levels of mortgage debt in the economy, buyers are weighted down in debt. They can afford to wait. The bottom line is the NAR is a trade organization; their analysts and spokespeople are paid to promote the industry. Things must be very bad for anyone in this organization to talk about price declines.

All of the housing news from the last month is bad. There is no way to spin this any other way. Inventories are at record levels. The US consumer is heavily indebted. Housing industry insiders are publicly expressing concern and aren’t issuing any earnings guidance for 2007. In short, the news indicates the US housing market could be in for a very big and ugly correction.

http://www.econbrowser.com/archives/2006/08/more_thoughts_o.html

http://www.thestreet.com/_dm/newsanalysis/homebuildersconstruction/10307674_2.html

http://money.cnn.com/2006/08/24/real_estate/inventive_incentives/

http://www.realtor.org/PublicAffairsWeb.nsf/Pages/SeptemberForecast07

Debating The Bush Economic Record: Building An Innovation Economy, Protecting Intellectual Property

Globalization has changed the world and for the American economy to stand at the forefront of this transition - we must commit ourselves to an innovation economy that harnesses the power of the Americans ingenuity, creativity, and hard work.

We need to look through the prism of innovation in all that we do to ensure that we can be more rapid, more nimble, in terms of bringing new goods and services to the market, and when we do that we need to ensure there is stringent protection for our intellectual property rights abroad. All too often, that is not the case. We can succeed – and prosper – in the global economy, but if continue to allow our good ideas to be stolen by our competitors.

Intellectual property theft is a major threat to our economic and national security; we can no longer treat it in the dismissive fashion adopted by this administration. Studies show that more than 80 percent of business software in China is pirated.

We cannot allow a situation to develop where, when we do our part through research and development, through education, through fiscal sanity, through increasing our own domestic savings, through becoming more competitive and innovative, the fruits of that labor of that American genius are stolen by those abroad through violating our intellectual property rights. That cannot be allowed to continue.

I have introduced legislation that would elevate the way we treat intellectual property theft to the same level as money laundering and other black market crimes. As well as creating one organized task-force to combat Intellectual Property theft, that for the first time would include members of the Office of Terrorism and Financial Intelligence.

Today's global economic shifts present America with unparalleled opportunities and serious challenges. America stands as the country most poised to take advantage of the new global economy if we have the right leadership and stand up for the American worker as they have stood with us in making this country great. The first step in realizing their potential is offering an aggressive approach to stopping IP theft, while protecting American jobs and our national security.

This is a guest contribution as part of NDN's ongoing debate about the economy. Read our new report The Bush Economic Record here.

Debating The Bush Economic Record: Lessons From History

If you want to see the worst of this President's economic track record, you only have to look backwards. In fact, the contrast between the last 30 years and the 30 years before that, from the end of the Second World War until the early 1970's is stark. In the golden year's of the Keynesian economy, real wages for hourly work doubled. And that is not including the advances from technology. In the last 30 years real wages have declined slightly, and that includes some of the advancements of technology. Measuring apples to apples, the difference is even worse for the present economy.

What made the New Deal, and the programs that followed, so successful? It wasn't a victory of party, nor of a specific policy, but a victory of a different kind of politics than we have seen for the last 30 years. At the root of America's rise was a partnership where government became the edge of the sword to enact the public good. It was this world leading labor force which made the creativity of American business over that time possible. The captains of industry could not have run the plays they did, without players who could execute on them. This advantage in work force remained, and paid huge dividends. It meant that labor could demand higher wages, it meant that companies had the confidence to build jumbo jets and government could plan and lay a vast interstate road network. Better workers meant better products and better government than other countries.

In the 1970's a series of monetary failures made Americans lose confidence in this kind of economy. Instead, we thought that cheap was the way to go. Don't invest, don't buy insurance and don't pay for work. And this runs afoul of what is, basically the first rule of economics: you get what you pay for, and you don't get what you don't pay for. As American business stopped paying for work, the incentive for the work force to get better declined. As we stopped introducing as many new technologies, the difference between America's labor force and the rest of the world eroded. For a while, we could get away with this, and coast on the national rents of the last decade of the Cold War.

But with the opening of the once Stalinist nations, with the change from a bi-polar world where almost half of the world's educated population was imprisoned in the Soviet system or its spin offs, to a multi-polar world, these national rents came to a final, and permanent end. The economic dislocation was painful, and prolonged. Reagan's good years of 1983-1990, "the fat years" as the Wall Street Journal likes to call them, were paid for with the six lean years of 1991-1996, and with the depth of the Great Recession of 1981-1982.

But if the last 30 years have been lost, then the last six have been positively wasted. The hard and painful political choices of the 1990's – which include George Herbert Walker Bush's raising taxes, and the bi-partisan effort to balance the budget, as well as the Clinton-Gore stewardship of the government – have been thrown away on one drunken spin of the wheel in Iraq. These last six years have seen the entire slender cushion that had been built up eaten away on four programs: Iraq, a drug company give away called "Medicare D", a vast series of tax breaks on upper incomes, and a huge and ineffective "homeland security" bureaucracy which couldn't read the memo "Katrina determined to strike in the US." Work hasn't been rewarded, instead, George W. Bush and Alan Greenspan put up a giant sign that said "housing market casino." Some people have made out like bandits on the housing market, but most people have not. The problem with houses is that we can't put them on ships and sell them to the Saudis, the Chinese or any of our other trading partners. All we can sell to them is the debt, which is now a chain around the necks of the American consumer. Incentives matter – the housing market was the only place to play. Stocks were bad, wages were flat, bonds were yielding at generational lows.

The answer begins, not with policy proposals, or laundry lists of programs to cut or enactd, but with a diagnosis of what is wrong. The numbers point to the symptoms: too much debt, too little investment, too much money spent on non-tradables like housing and not enough on exports, too much energy consumption, too little conservation, too low a return for those who work, too many tax breaks for those who shirk. It is not time for Democrats to pile into the wonkavator and cover the country with white papers, but to win elections.

Winning elections means telling the American people in plain language that we have work to do. It is not a time for commissions and committees, but commitment to direct and positive action to improve the fortunes of the broad majority of Americans now. It means telling the story of how America lifted itself form backwards poverty to forward prosperity, and challenging the electorate to make a clear choice between losing another generation, or becoming a generation found. It means telling Americans that while we are on the wrong track, we have not yet lost our way – that guided by our heads and hearts, that there is nothing wrong with America, that we cannot fix with our hands.

This is a guest contribution as part of NDN's ongoing debate about the economy. Read our new report The Bush Economic Record here.

Debating The Bush Economic Record: Day 2

Its been a good week for debating the merits of globalization, and the Bush economic record. As Krugman writes in this morning's times, in a thoughtful response to "conservative economic commentators" otherwise known as David Brooks: 

We can have an interesting discussion about questions like the role of unions in wage inequality, or the role of lax regulation in exploding C.E.O. pay, there is no question that the policies of the current majority party — a party that has held a much-needed increase in the minimum wage hostage to large tax cuts for giant estates — have relentlessly favored the interests of a tiny, wealthy minority against everyone else.

Yesterday we had a series of very stimulating posts on different aspects of globalization and policies of the current administration, not least Mark Thoma's two posts on inequality, and Bonddad on the housing crisis. Today we'll have some more, including Senator Evan Bayh on the importance of Intellectual Property, and our own Rob Shapiro on the need to work to rebuild the national consensus on trade. If you didn't catch it yesterday, have a look at our new economic report here. 

Bush world crashes into the real world, again

From the NYTimes today:

"The Bush administration’s proposal to bring leading terrorism suspects before military tribunals met stiff resistance Thursday from key Republicans and top military lawyers who said some provisions would not withstand legal scrutiny or do enough to repair the nation’s tarnished reputation internationally."

It happened so fast.  On Wednesday the President launches an aggressive effort to recast the national security/foreign policy conversation.  On Thursday, leaders of his own Party and the Pentagon repudiate his new approach.  From a governing standpoint, we should be pleased with has happened.  From a political standpoint, it shows how extraordinarily out of touch and removed the White House has become from the rest of Washington, and of course, the country.  Their political endgame this fall will be ferocious, hard-fought, well-funded and coordinated.  But it is hard to spin away, and advertize away, the hard reality of a failed foreign policy and an economic policy that has benefited only a tiny few.  The speedy crash of this new initiative should worry Republicans that there is no easy way out of the current mess they've made out of our government. 

One interesting thing to watch next week is that the House Republicans, the most terrified group in Washington today, are standing firm with the President's already dead on arrival package.  Will we have immigration reform redux, where the House R's take a narrow and base-driven position at odds with good governing and the Senate R's, leaving no room from compromise? Or will the President in this case have to bring all parties together, including the Democrats, and work out a deal to get something passed before the fall?

Explaining the Gains from Globalization

Recently, the topic of how to share the gains from globalization in order to prevent a protectionist backlash has been widely discussed. For example, the in the last few days the Financial Times has two articles on this issue, Share gains with globalisation’s losers by Martin Wolf and Global stability rests on sharing the gains by Jan Kregel and William Milberg, the New York Times has had many articles about this such as Real Wages Fail to Match a Rise in Productivity by Steven Greenhouse and David Leonhardt, and this topic has been discussed in many other forums as well including this year's Federal Reserve Symposium at Jackson Hole, Wyoming.

A common theme in these articles is that a key to political success and to staving off protectionist responses to problems perceived to be caused by globalization and technological change is to find a way to share the gains more equally without sacrificing the political support of the winners. However, Berkeley economist Brad DeLong, writing about the Martin Wolf Financial Times article, says simply redistributing the gains may not be enough:

Brad DeLong: Ben Bernanke said that the world will move forward with globalization only if policy makers "ensure that the benefits of integration are sufficiently widely shared." He is wrong: just making the benefits of integration widely shared isn't enough. After all, the benefits of globalization and increased economic integration are widely shared today--and yet forward progress on further globalization still hangs in the balance for politico-economic and politico-security reasons.

In the United States, at least, the problem is that most beneficiaries from globalization don't really know that they are beneficiaries, or how much they benefit. Feckless congressmen and congresswomen don't understand that the American economy is cushioned from their fiscal policy stupidities by the ability of the U.S. government to sell bonds internationally on a jaw-droppingly unbelievable scale. Home sellers in California don't realize that they got such a good price because of financing from across the Pacific. Walmart shoppers see the "made in China" stickers, but don't understand what a good deal they are getting because the rulers of the PRC are desperate to sell the products that their workers make at always low prices in order to stay as close as possible to full employment.

The task is primarily one of making perceptions agree with reality, and only secondarily one of changing reality.

If Brad is correct (but see Brad Setser for a counterargument to the diverse benefits, concentrated costs claim), the task before the Democratic Party is, I think, two-fold. First, there are both winners and losers from globalization and the groups that are negatively impacted cannot, and should not, be ignored. Policies such as universal health care, portable retirement packages, and other changes that reduce the cost of unemployment are a place to start. Creating the perception that the Democratic Party is strongly devoted to helping those who are hurt by globalization would be a positive step to take.

Second, the Party must do a better job of explaining how workers and their families benefit from open markets so that, as Brad DeLong put it, "perceptions agree with reality." This is not an easy task, but it is essential that Party leaders explain how globalization benefits typical households.

Paul Krugman explains the difficulty in a passage from his textbook on international trade:

[P]olicies that impose large losses in total, but small losses on any individual, may not face any effective opposition. ...[T]ake the example of the sugar import quota. This policy imposes a cost on a typical American family of approximately $25 per year. Should a consumer lobby his or her Congressperson to remove the quota? From the point of view of individual self-interest, surely not. Since one letter has only a marginal effect on the policy, the individual payoff from such a letter is probably literally not worth the paper it is written on, let alone the postage stamp. ... And yet if a million voters were to write demanding an end to the quota, it would surely be repealed, bringing benefits to consumers far exceeding the cost of sending the letters. ...[T]here is a problem of collective action: While it is in the interests of the group as a whole to press for favorable policies, it is not in any individual's interest to do so.

The problem of collective action can best be overcome when a group is small (so that each individual reaps a significant share of the benefits of favorable policies) and/or well organized (so that members of the group can be mobilized to act in their collective interest). The reason that a policy like the sugar quota can happen is that the sugar producers form a relatively small, well-organized group that is well aware of the size of the implicit subsidy members receive; while sugar consumers are a huge population that does not even perceive itself as an interest group. The problem of collective action, then, can explain why policies that not only seem to produce more costs than benefits but that also seem to hurt far more voters than they help can nonetheless be adopted...

What does this tell us? First, if Democratic Party leaders are organized and united on these issues, they have a better chance of achieving their goals. No surprise there. But more importantly, the benefits should be explained not in broad sweeping terms as is generally the case, but rather in terms of how it benefits smaller groups within the Democratic Party. The message needs to be targeted to specific groups. How does globalization benefit consumers, the poor, small businesses, and so on, and how will those who are harmed be protected? There are good answers to all of these questions, but it will require politicians to learn about and explain the answers to their constituent groups rather than caving into the loud and well-funded voices of special interests.

This is a guest contribution as part of NDN's ongoing debate about the economy. Read our new report The Bush Economic Record here.

Bruce Lindsey's Letter to ABC

Bruce Lindsey, Bill Clinton's attorney and the CEO of the William J. Clinton Foundation, wrote to the President and Chief Executive Officer of The Walt Disney Company, parent company of ABC last week, asking him to refrain from airing ABC's upcoming miniseries The Path to 9/11 "until [its] egregious factual errors are corrected."  The letter is reprinted below.

Criticism of this miniseries has been all over the blogs.  You can read what Simon (an ABC alumnus) had to say here.  It'll be interesting to see if uproar on the internet forces changes to The Path to 9/11, just as it did to Snakes on a Plane.

 

September 1, 2006

Dear Bob,

As you know, ABC intends to air a two part miniseries, “The Path to 9/11,” which purports to document the events leading up to the terrorist attacks of September 11, 2001. ABC claims that the show is based on the 9/11 Commission Report and, as Steve McPherson, President of ABC Entertainment, has said: “When you take on the responsibility of telling the story behind such an important event, it is absolutely critical that you get it right.”

By ABC’s own standard, ABC has gotten it terribly wrong. The content of this drama is factually and incontrovertibly inaccurate and ABC has a duty to fully correct all errors or pull the drama entirely. It is unconscionable to mislead the American public about one of the most horrendous tragedies our country has ever known.

Despite several requests to view the miniseries, we have not been given the courtesy of seeing it. This is particularly troubling given the reputation of Cyrus Nowrasteh, the drama’s writer/producer. Mr. Nowrasteh has been criticized for inaccurately portraying historical events in the past. In response to previous criticism, he has even said, “I made a conscious effort not to contact any members of the Administration because I didn’t want them to stymie my efforts.” Indeed, while we have not been given the courtesy of a viewing, based upon reports from people who have seen the drama you plan to air, we understand that there are at least three significant factual errors:

-- The drama leads viewers to believe that National Security Advisor Sandy Berger told the CIA that he would not authorize them to take a shot at bin Laden. This is complete fiction and the event portrayed never happened. First of all, the 9/11 Commission Report makes clear that CIA Director George Tenet had been directed by President Clinton and Mr. Berger to get bin Laden (p. 199 & 508-509). Secondly, Roger Cressy, National Security Council senior director for counterterrorism from 1999-2001, has said, on more than one occasion, “Mr. Clinton approved every request made of him by the CIA and the U.S. military involving using force against bin Laden and al-Qaeda.”

In addition, ABC’s own counter-terrorism consultant, Richard Clarke, has said that contrary to the movie:

1) No US military or CIA personnel were on the ground in Afghanistan and saw bin Laden;

2) The head of the Northern Alliance, Masood, was nowhere near the alleged bin Laden camp and did not see bin Laden; and

3) CIA Director Tenet said that he could not recommend a strike on the camp because the information was single-sourced and there would be no way to know if bin Laden was in the target area by the time a cruise missile hit it.

As Clarke and others will corroborate, President Clinton did in fact approve of a standing plan to use Afghans who worked for the CIA to capture bin Laden. The CIA’s Afghan operatives were never able to carry out the operation and the CIA recommended against inserting Agency personnel to do it. The Department of Defense, when asked by President Clinton to examine the use of US troops to capture bin Laden, also recommended against that option.

-- The drama claims that former Secretary of State Madeleine Albright refused to sanction a missile strike against bin Laden without first alerting the Pakistanis and notified them over the objections of the military. Again, this is false.

-- Using newsreel footage of President Clinton, the drama insinuates that President Clinton was too pre-occupied with the impeachment and the Lewinsky matter to be engaged in pursuing bin Laden. This allegation is absurd and was directly refuted by ABC News consultant Richard Clarke in his book, Against All Enemies: “Clinton made clear that we were to give him our best national security advice without regard to his personal problems. ‘Do you recommend that we strike on the 20th? Fine. Do not give me political advice or personal advice about the timing. That’s my problem. Let me worry about that.’ If we thought this was the best time to hit the Afghan camps, he would order it and take the heat.”

While these are three examples that we are aware of that are utterly baseless, they are clearly indicative of other errors in the substance and bent of the film. Indeed, the overall tone in the advertisements we’ve seen for this drama suggest that President Clinton was inattentive to the threat of terrorism or insufficiently intent upon eliminating the threat from bin Laden. Note that the 9/11 Commission Report says:

-- We believe that both President Clinton and President Bush were genuinely concerned about the danger posed by al Qaeda.” (p. 349)

-- “By May 1998 … clearly, President Clinton’s concern about terrorism had steadily risen.” (p. 102)

-- “President Clinton was deeply concerned about bin Laden. He and his national security advisor, Samuel ‘Sandy’ Berger, ensured they had a special daily pipeline of reports feeding them the latest updates on bin Laden’s reported location.” (p. 175)

-- “President Clinton spoke of terrorism in numerous public statements. In his August 5, 1996, remarks at George Washington University, he called terrorism ‘the enemy of our generation.’” (p. 500)

We challenge anyone to read the 9/11 Commission Report and find any basis for the false allegations noted above or the tenor of the drama, which suggests that the Clinton Administration was inattentive to the threat of a terrorist strike.

Frankly, the bias of the ABC drama is not surprising given the background and political leanings of its writer/producer, Mr. Nowrasteh, which have been well-documented on numerous conservative blogs and talk shows in his promotion of this film. Mr. Nowrasteh’s bias can be seen in an interview he gave to David Horowitz’s conservative magazine Frontpage, during which he said:

"The 9/11 report details the Clinton’s administration’s response – or lack of response – to Al Qaeda and how this emboldened Bin Laden to keep attacking American interests. The worst example is the response to the October, 2000 attack of the U.S.S. Cole in Yemen where 17 American sailors were killed. There simply was no response. Nothing."

But as Sandy Berger told the 9/11 Commission: “[T]o go to war, a president needs to be able to say that his senior intelligence and law enforcement officers have concluded who is responsible.” And as the 9/11 Commission report repeatedly acknowledges, the US did not have clear evidence of bin Laden’s connection to the attack on the USS Cole before the end of the Clinton Administration (p. 192, 193, 195 & executive summary).

While ABC is promoting “The Path to 9/11” as a dramatization of historical fact, in truth it is a fictitious rewriting of history that will be misinterpreted by millions of Americans. Given your stated obligation to “get it right,” we urge you to do so by not airing this drama until the egregious factual errors are corrected, an endeavor we could easily assist you with given the opportunity to view the film.

Sincerely,

Bruce R. Lindsey

Chief Executive Officer

William J. Clinton Foundation

Douglas J. Band

Counselor to President Clinton

Office of William Jefferson Clinton

Cc: Ms. Madeleine K. Albright

Mr. Samuel R. Berger

Mr. Richard A. Clarke

Mr. Stephen McPherson

Mr. George J. Mitchell

Mr. John D. Podesta

Mr. David Westin

National Commission on Terrorist Attacks upon the United States

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